Weekly Spotlight : Game Theory | Business Management

 Which of the following sentences best illustrates the concept of “game theory”? Answer：✅ A) 

Game theory in business management is the study of strategic decision-making where companies (or “players”) anticipate the actions and reactions of competitors to maximize their own outcomes (profits, market share, etc.).

Scenario:  Two smartphone companies, Firm A and Firm B, sell similar products in the same market. Each can choose to Keep prices high (Premium pricing）or Lower prices (Discount pricing), they don’t know what the other will do, but each tries to predict the other’s move.

Game theory insight: If both firms lower prices, they hurt profits (a “price war”). If both keep prices high, both benefit — but only if they trust the other won’t drop prices.

This is a classic “Prisoner’s Dilemma” in game theory — cooperation gives the best outcome, but fear of being undercut often leads both to act defensively.

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【05/2025】| MAY UPDATES: EDURISES MICROLEARNING

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